Providence Resources P.l.c.: Farm-Out Agreement Signed
Wednesday 28 March 2018
Providence Resources P.l.c. announced that the Barryroe Partners have signed a Farm-Out Agreement (“FOA”) with APEC in relation to SEL 1/11. APEC is a privately owned Chinese company which has a strategic partnership with China Oilfield Services Co., Ltd and JIC Capital Management Limited for the investment and development of offshore oil and gas opportunities worldwide utilising Chinese drilling units, services and equipment.
Under the terms of the FOA, in consideration for APEC being assigned a 50% working interest in SEL 1/11:
Commercial Terms
- APEC will be directly responsible for paying 50% of all the cost obligations associated with the drilling of 3 vertical wells, plus any associated side-tracks and well testing;
- APEC will provide a drilling unit and related operational services for the Drilling Programme;
- APEC will finance, by way of a non-recourse loan facility, the remaining 50% of all costs of the Barryroe Partners in respect of the Drilling Programme;
- The Loan, drawable against the budget for the Drilling Programme, will incur an annual interest rate of LIBOR +5% and will be repayable from production cashflow from SEL 1/11 with APEC being entitled to 80% of production cashflow from SEL 1/11 until the Loan is repaid in full;
- Following repayment of the Loan, APEC will be entitled to 50% of production cashflow from SEL 1/11 with EXOLA and Lansdowne being entitled to 40% and 10% of production cashflow, respectively.
Operational Terms
- EXOLA will act as Operator for the Drilling Programme with technical assistance being provided by the APEC Consortium; and,
- After the completion of the Drilling Programme, APEC will have the right to become Operator for the development/production phase.
Issuance of Warrants to APEC
- Upon completion of the Drilling Programme, APEC will be able to subscribe for warrants over 59.2 million shares in Providence at a strike price of £0.12 per share.
- The Warrants, representing circa 9.9% of the current issued share capital of Providence, are exercisable for a period of 6 months following the completion of the Drilling Programme.
Closing
The Closing of the Farm-Out, which is expected to occur in Q3 2018, is conditional on completion of all ancillary legal documentation required to implement the terms of the FOA, and is subject to the approval of the Minister of State at the Department of Communications, Climate Action and Environment and the approval of the Chinese government. In addition, the details of and schedule for the Drilling Programme are subject to further ongoing technical discussions between the Consortium, Exola and Lansdowne. Subject to Closing, the revised equity in SEL 1/11 will be EXOLA (Operator, 40%), APEC (50%) & Lansdowne (10%).